In need of a little more information? Here to offer more insight into the decision-making process is Paul Miller, vice president with insurance broker M.F. Irvine Corporate Solutions in Conshohocken, PA. He is also current president of the Philadelphia chapter of Certified Employee Benefit Specialists (CEBS). Miller offers some of the lesser-noted ramifications of “pay or play” and takes a look ahead at what we might expect to see moving forward in terms of costs.

Q:Will it make sense for an employer to just drop coverage and pay the penalty if they are paying more than $2,000 per year toward their medical benefits now?

Paul Miller:It may, but I would suggest considering the fact that the employees still have to go to the exchanges and get coverage. The $80,000 penalty mentioned (see main story) goes to the federal government and is an after-tax penalty, so the real impact to a business may be well over $100,000. The only thing this would do is get the employer out of the hassle of offering medical coverage.

This may be a solid option if most of the employees would receive a significant federal subsidy for obtaining their medical benefits on the exchange. This would occur if they are well below 400 percent of the federal poverty level (FPL) ,which is approximately $44,000 for an individual and $92,000 for a family of four. The closer they are to these limits the lower the subsidy.

Q:What will happen to the cost of medical coverage in 2014 and after? Won’t costs go down?

Miller: That depends on how many employees you have covered and how your plan is underwritten. After Jan. 1, 2014, for groups with less than 100 employees (less than 50 in some states), a carrier cannot take health conditions into account in setting rates. Some states, like New Jersey, have not allowed carriers to take health conditions or claim experience into account for groups of under 50 employees. However, most states have allowed carriers to set favorable rates for healthy groups and set higher rates for unhealthy groups of all sizes.

In addition, carriers are no longer going to be able to set rates based upon gender, and the differential between rates for younger vs. older people will be restricted. So, a group with favorable claim experience and demographics may see a very significant increase with their next renewal in 2014. Groups that have had poor claim experience or less favorable demographics from an underwriting standpoint will be less affected.

In addition, there are fees and plan changes that will increase rates in 2014. These would be built into fully insured premiums by the carrier, however; they will put upward pressure on rates.

Q:What can employers do to control their medical costs?

Miller: It is clear that if an employer’s costs for providing medical coverage are rising at a faster rate than their revenues and profits, this is unsustainable. If an employer keeps accepting medical renewals each year that exceed 10 percent, but its profits are only growing at 5 percent, it is only a matter of time until the company is out of business.

We have been working with our clients that have favorable claim experience to integrate a strategy of self-funding their medical plans. Until recently, only groups with more than 1,000 employees were consistently self-funding their medical plans because there can be cash flow volatility based upon claim experience.

However, with the shift in costs to private insurance, the changes in underwriting and the inability for a company to continue to accept increasing medical renewals, companies are looking to take control of the cost drivers in their medical plans and manage them like they would other significant expenses. Self-funding allows you to obtain the data to see what drives your costs and establish programs of wellness and disease management to have a positive impact on the bottom line.

In addition, we are incorporating a strategy of “level-funding” to address the issues that claim volatility would create from a cash flow standpoint. We have seen tremendous results in saving mid-size clients hundreds of thousands of dollars.

Death. Taxes. Obviously-scripted reality television shows. Well, we can add the Patient Protection and Affordable Care Act (PPACA) of 2010—commonly (and sometimes derisively) referred to as Obamacare—to the list of unpleasant certainties. And while we've known about mandatory health insurance for all Americans for several years now, some of the biggest provisions to come from the 5,000-plus-page law, namely the individual and employer mandates, are scheduled to kick in Jan. 1, 2014.

And New Year's Day is closer than you think. So, are you ready?

Most of the buzz involving PPACA is the "pay or play" stipulation. Employers with more than 50 full-time workers must decide if they will offer health insurance or pay the penalty and have their employees use the state insurance exchanges. For example, a firm with 70 rated full-time employees that chooses to pay the penalty would be hit with an $80,000 penalty (the first 30 employees are not counted, thus 40 multiplied by $2,000 per person).

A second way printing companies can pay the penalty is if their coverage is not affordable to 95 percent of their full-time employees (defined as costing the employees up to 9.5 percent of their W-2 wage for single coverage), or the plan does not meet the minimum value requirement (the plans pay for at least 60 percent of covered health care expenses). The penalty equals the number of full-time employees receiving premium tax credit or cost-sharing reduction—making less than 400 percent of the federal poverty level—multiplied by 1/12th of $3,000 (lesser of amount calculated or the amount that would be owed if the employer did not offer coverage).

Most printers are in good shape. Less than 5 percent of firms do not currently offer health insurance benefits, according to a study by the Printing Industries of America (PIA). Further, 75 percent to 80 percent of the printing industry consists of firms with fewer than 50 employees. Thus, only a fraction of benefits-less companies find themselves needing to make the "pay or play" decision.